About 70 firefighters are still at the scene, three-and-a-half hours after being called out to Saxby Road.
Staff were evacuated from a single storage warehouse and police set up a safety cordon around the site.
Fire crews are using six jets and
the aerial ladder to quell the flames.
A Leicestershire Fire and Rescue spokeswoman said an acetylene cylinder was involved and a safe hazard zone had been set up.
An ambulance was called to the scene and put on standby as a precaution - standard practice when there are 10 or more fire appliances at the scene of a blaze.
Earlier reports suggested gas cylinders were stored at the site while it was also understood live ammunition is stored in an adjacent building.
An unconfirmed report suggested the fire may have been caused by a fault with an electrical forklift truck.
The fire is on the part of the Asfordby Storage and Haulage site nearest to Melton Mowbray Hospital.
Police closed off the junction of Saxby Road and Thorpe Road at Thorpe End and traffic from Granthan was being diverted away from the scene.
This picture was taken by reader Pete Musson 'at the moment of explosion'.
If you have a picture of the scene please email editor@meltontimes.co.uk
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